Senator's Death, NCUA Vs. CU Trades, All Affecting Bill
WASHINGTON-Senate leaders last week put off a final vote on the credit union-opposed bank reform bill after the death of Democratic icon Robert Byrd of West Virginia, jeopardizing passage, even as the House was voting final passage of the measure.
The delay gives credit unions and other foes of the landmark bill one last chance to defeat the measure, which passed the Senate in May only after Democrat leaders were able to round up a bare super-majority of 60 votes to overcome a Republican filibuster. The death of the 92-year-old Byrd gives the Democrats just 57 votes, which left them scrambling last week to hold three of the four Republicans who voted with them the first time.
The credit union lobby continued to fight the bill because of the amendment that would set the Federal Reserve up as regulator of debit card interchange, and was working uphill to enable the Republicans to hold their filibuster when they return next week from the congressional July 4th recess. "While we recognize the need to reform the financial system to rein in bad actors, we are disappointed that the House approved the (bill) with an extraneous provision to set price controls on debit interchange," said NAFCU CEO Fred Becker. "This issue had nothing to do with the financial crisis and will only make big box retailers richer at the expense of credit unions and their 92 million members."
NCUA Endorsement Hurts CU Lobby Efforts
The credit union lobby's efforts to defeat the bill also suffered a major blow last week when NCUA endorsed final passage of the measure. NCUA Chairman Debbie Matz told House Financial Services Committee Chairman Barney Frank, who crafted the landmark 2,300-page legislation, she strongly supports the bill's reforms. "I am confident that this measure will strengthen the American financial services sector, benefiting credit unions and credit union members in multiple ways," Matz wrote in a letter hand-delivered to the Massachusetts Democrat the night before the House vote.
Matz cited provisions of the bill extending a temporary federal guarantee of all non-interest-bearing transaction accounts to credit unions; making permanent the increase in federal deposit insurance to $250,000 per account; an NCUA seat on a new Financial Stability Oversight Council and the creation of a consumer financial protection bureau as reasons the agency supports the bill. She did not mention the interchange amendment, which has caused the overwhelming majority of credit unions to oppose the bill.
Senate Democrats were doing everything they could last week to satisfy concerns of three Republicans who voted for the bill before but expressed pause after a last-second amendment was added that would have assessed a $19-billion levy on banks to help pay the costs of the legislation. They even went so far as to reopen a conference committee in which the House and Senate versions of the 2,300-page bill were joined to scrap the bank levy and replace it with funds taken from the Troubled Asset Relief Program and FDIC insurance assessments on big banks over $10 billion in assets.
But the assessment, which would build the FDIC reserve ratio up to 1.35% (dollars reserved per $100 of insured deposits), provides another peril for credit unions, as the National CU Share Insurance Fund's reserve ratio falls near 1.20%. The banking lobby was quick to seize the disparity after last week's action. "If the Congress determines that it wants to move the FDIC target to 1.35, should it not make the equivalent change for the credit union's NCUIF, especially since credit unions have already received a government loan to support their insurance fund," asked Edward Yingling, head of the American Bankers Association. "Does Congress intend for the FDIC fund to be better capitalized than NCUIF?"
The full House and Senate both passed the bill before but had to vote again on the package, as it has been changed in the combining of the separate versions passed by each chamber.
Meantime, the merchants payments coalition was continuing to lobby hard for the interchange amendment that will regulate debit card fees. "I'm not declaring victory till they lower interchange fees on debit cards," said Lyle Beckwith, chief lobbyist for the National Association of Convenience Stores, which, with the rest of the merchants payments coalition, is continuing to run radio and print adds both inside and outside the Beltway supporting the interchange amendment.
Senate Republicans conceded they expected to launch a filibuster and hope to hold together the entire Republican caucus to stop the Democrats from getting 60 votes. "I expect most of the Republicans will vote again against the bill," said Don Stewart, chief spokesman for Senate Minority Leader Mitch McConnell of Kentucky. "I don't think they've made it any better."
Death Of A Senator
The 60-vote super majority appeared a certainty last week but the odds changed last Monday with the death of Democratic icon Robert Byrd of West Virginia. At least one other Democrat has vowed to vote against the bill, cutting the sure Democrat votes to 57, at most, meaning they need at least three Republicans to join them to overcome a filibuster.
Stewart predicted the upheaval in the Senate will cause Democrat leaders to push a final vote off on the bank bill, which was expected to occur this week, until after next week's Independence Day recess. "They (the Democrats) don't have the votes," he said.
The main provisions of the bill will create an oversight panel to monitor troubles of too-big-to-fail institutions; create a consumer financial protection agency; regulate financial derivatives and set new rules for Wall Street rating agencies.